China might be the real winner in a trade war

The great victory of Donald Trump on US presidential election may seem like a great loss for China. After most of the time his campaign called China a rogue who steals American jobs, the election of Trump almost certainly means that Washington will take a much tougher stance on trade, Chinese currency and other contentious economic issues. However, the Chinese policymakers likely will gladly welcome President Trump, as the rise of nationalism that inspired it, will ultimately serve the economic interests of China, not America.

Of course, Trump will cause some disruption in the short term. The economic relations of China and USA are the most important. The Celestial Empire needs American consumers to buy its exports, as well as US investment and technology to improve their industry.

The policies, which Trump threatened to impose against Beijing, such as lifting duties, renegotiating trade agreements, defining the country as a currency manipulator, may strike on the growth of China, as it is struggling with mounting debt, overcapacity and stagnant exports.

But the Trump policies may eventually work in favor of China. The reason is that in fact China, which railed against Trump, no longer exists in this way. China today is not interested so the assembly line for the production of jeans and iPhone. Indeed, given rising costs, China lost many manufacturing jobs as the expense of other developing countries and the United States.

The new China has bigger and bolder goals, which Trump apparently does not understand. Instead of being the workshop of the world, producing cheap stuff for Wal-Mart, China wants to create their own national leaders to compete with, and even supplant American. The Chinese leaders want American consumers to buy Chinese smartphones that use Chinese operating systems, instead of Chinese consumers to buy the products of Apple. The Government supports this plan with enough subsidies and other support for the Chinese companies that develop new technologies and products. The national industrial strategy called “Made in China 2025” was created to promote the production of high-tech ships, medical devices, robots and other modern facilities. The local governments distribute money and other incentives for budding entrepreneurs.

The international companies claim that Chinese government has become less hospitable, and the business environment more hostile. They face mysterious regulatory investigations, slow bureaucratic practices and investment barriers that stop their business. The policies of Trump will give China a cover with which to strengthen this approach.

The Chinese market has become critical to US companies from Starbucks to Boeing. If China closed the door even more for increasingly affluent consumers and its booming home market, this will limit revenue and profits and the number of jobs that can be created at home. The anti-trust positions of Trump will allow China to expand its economic and political influence in Asia at the expense of the US.

The Trans-Pacific Trade and Investment Partnership (TPTI/TTIP) will probably die when Trump took office, and thus the chances of America to strengthen its presence in the economically vital Asian region and to increase pressure on China to adopt US commercial standards. This clears the way to China to push his own Asian trade pact. If the United States are less engaged in Asia, Beijing will be able to shape the regional political and economic integration under its own conditions.

To be fair to Trump, he has good reasons to take a tougher stance against China. The country’s progress in reforms promised to open is negligible. The problem with the approach of Trump is that he fought in the war yesterday for today’s industries and jobs. Rather than obey China, it will help the country compete with American companies in the future.